The Ambani formula for making money: 17 years + 1 Nifty stock = 2,200% profit

Economic Times

2 days ago

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Timing the Market Perfectly
Buy right, sit tight and sell right! Asia's richest billionaire Mukesh Ambani has just taught stock market investors how making smart bets at cheap valuations can create long-term wealth. In a masterstroke that exemplifies contrarian investing, Reliance Industries (RIL) has booked a staggering 23-fold return by selling its Asian Paints stake for Rs 7,704 crore—nearly 17 years after buying it during the depths of the 2008 global financial crisis.Back in January 2008, when markets were reeling from the financial meltdown, RIL had quietly accumulated a 4.9% stake in Asian Paints for just Rs 500 crore. Now, the conglomerate has sold 3.6% of that holding to SBI Mutual Fund, pocketing a handsome Rs 7,704 crore in what ranks among the most spectacular long-term bets in Indian corporate history.Reliance informed exchanges that 3.5 crore shares held by the company via Siddhant Commercials Ltd were sold at Rs 2,201 per share on Thursday. The company's stock closed at Rs 2,218.05 a piece on Thursday. Inclusive of dividends, at current market value, Reliance would make a near 23-fold return on its investment.After the stake sale, RIL arm Siddhant Commercials' shareholding in Asian Paints dipped to 1.26 per cent from 4.90 per cent. With the acquisition of shares, SBI Mutual Fund's shareholding in Asian Paints rose to 5.15 per cent from 1.51 per cent.The timing of Ambani's exit appears prescient. Asian Paints' shares have declined by 32% over the past 2 years, making it one of the weakest performers among Nifty blue chips. India's $9 billion paints industry is facing acute margin pressure amidst heightened competition that has seen Asian Paints come under severe pressure from new entrants like Aditya Birla Opus who are striving to topple the number one player from its perch.According to Elara Securities, Asian Paints' market share has fallen from 59 percent to 52 percent in FY25—a significant loss in a highly competitive market. Combined with revenue stagnation, Asian Paints has lost much of its lustre.For Asian Paints, FY25 was a weak year. Decorative business (87% of consolidated sales) declined by 5% YoY, with volume growth of 2.5% (weakest in over the last two decades). Industrial business grew by 6% while International business sales were flat performance for the year. The management attributed underperformance in the decorative segment to weakness in industry growth and emphasised that the competitive intensity of the business will continue over the near term."Near term demand trends remain subdued, FY26 outlook remains bleak," said Mehul Desai of JM Financial . "Competitive intensity in the paints segment remains unabated (Grasim's entry, increased activity from existing incumbents and a likely recovery in Dulux brand once the acquisition goes through)." JSW Paints is in the final stages of buying Dulux from Akzo Nobel.Despite the challenges, Asian Paints still has a market share of 44% in decorative paints, and is also the second largest in Asia and eighth globally. The company has an annual domestic decorative paint capacity of 1.85 million kilo litres, serving consumers in over 60 countries. It has the country's largest distribution network, with 74,129 dealers, supported by over 50,500 Colour World shade-mixing machines and over 430 Colour Ideas stores.Reliance had explored divesting its stake five years ago, ahead of launching India's largest rights issue. It was also in the process of deleveraging its balance sheet following a mega capex plan led by telecom. However, it did not go through with the plan and instead raised a combined $25 billion for the digital, telecom, and retail ventures of the conglomerate through a series of investments from marquee global strategic and financial investors.The decision to hold on proved golden, allowing Ambani to maximize returns from what was already a phenomenal bet.